Questions about Sidechains

[dpkay]

Hello

Where can I find more information about sidechains? The paragraph here is really short.

I have some open (trivial) questions:

Can a sidechain

1. be private?
2. be (only) maintained by me?
3. store data?
4. be stored in partial on my own nodes?

Thank you.

[arjunyel]

Looks like there was a presentation on sidechains today https://twitter.com/IOHK_Charles/status/950702333452832768

[ZCryt0Knight]

I have a similar set of questions:

Can sidechains be set up to have a separate operating environment in terms of

1. TPS.
2. Length of blockchain stored in them.
3. Separate currencies built specifically for the sidechain.

Will ADA stakeholders validate transactions in sidechains/benefit from them in terms of fees?

The presentations I have seen so far cover a lot of ground on the technical side but don’t seem to mention anything about these nuances.

[vantuz-subhuman]

@ZCryt0Knight

Can sidechains be set up to have a separate operating environment in terms of

1. TPS.
2. Length of blockchain stored in them.
3. Separate currencies built specifically for the sidechain.

1. Yes
2. Yes
3. Yes, when you have SL and CL as two sidechains with ADA “transferable between them” you actually (oversimplified) have a chain-1 with a native token on it, and a chain-2 with a native token on it, and you just say that for all intents and purposes those tokens are equal, because you only unlock X tokens on chain-2 when you lock X tokens on chain-1, so they can never “exist” simultaneously. But that does not stop you from creating a chain-3 with a native token that is not related to any other chain in any way.

@ZCryt0Knight

Will ADA stakeholders validate transactions in sidechains/benefit from them in terms of fees?

Depend on the sidechain and how exactly is it operated. CL will have two sidechain to the SL, and stakeholders will profit from fees on both SL and CL. But it should be possible to create a sidechain on a completely different consensus, for example, so the same validators will not even be applicable (permissioned sidechains, for example).

@ZCryt0Knight

The presentations I have seen so far cover a lot of ground on the technical side but don’t seem to mention anything about these nuances.

It’s still work in progress. Once the topic is more developed - I’m sure we’re gonna get more info about it.

[ZCryt0Knight]

@vantuz-subhuman

• Yes
• Yes
• Yes, when you have SL and CL as two sidechains with ADA “transferable between them” you actually (oversimplified) have a chain-1 with a native token on it, and a chain-2 with a native token on it, and you just say that for all intents and purposes those tokens are equal, because you only unlock X tokens on chain-2 when you lock X tokens on chain-1, so they can never “exist” simultaneously. But that does not stop you from creating a chain-3 with a native token that is not related to any other chain in any way.

This is quite interesting, because it opens up a whole new way to process transactions in an environment that is not restricted by the mainchain. The reason I am asking these is to assess if, say, a bank in Adis-A-Baba could effectively transfer all it’s operations onto a Cardano sidechain, create the digital version of the local currency and tie it through an open exchange rate to ADA.

Since banks normally have a 5-7 year legal requirement to store data, it wouldn’t make sense for them to have a sidechain that stores records permanently. This could greatly reduce chain bloat at higher TPS, which these financial entities may require.

Ideally, a country would want to transfer its whole financial system onto Cardano, but that might take time… I am glad to hear that there are no technical limitations to what I described.

@vantuz-subhuman

Depend on the sidechain and how exactly is it operated. CL will have two sidechain to the SL, and stakeholders will profit from fees on both SL and CL. But it should be possible to create a sidechain on a completely different consensus, for example, so the same validators will not even be applicable (permissioned sidechains, for example).

I assume that no matter what sidechains decide to do, the fuel used in them to validate transactions will be ADA. I am ok with validators being completely different as long as Cardano Ecosystem benefits from transaction fees. Transactions fees are insignificant source of return for stakeholders at current levels, but if we see them increase to the tunes of millions transactions per day on multiple sidechains, we will have a nice system in place.

[vantuz-subhuman]

@ZCryt0Knight

This is quite interesting, because it opens up a whole new way to process transactions in an environment that is not restricted by the mainchain. The reason I am asking these is to assess if, say, a bank in Adis-A-Baba could effectively transfer all it’s operations onto a Cardano sidechain, create the digital version of the local currency and tie it through an open exchange rate to ADA.

Yes, it is almost exactly one of the cases for sidechains that CH was describing in THE whiteboard video: https://www.youtube.com/watch?v=Ja9D0kpksxw

@ZCryt0Knight

I assume that no matter what sidechains decide to do, the fuel used in them to validate transactions will be ADA. I am ok with validators being completely different as long as Cardano Ecosystem benefits from transaction fees.

Not necessarily, Cardano Ecosystem should benefit from fees only when there’s some work put by the Cardano Network specifically in this transaction. Fees are payments for services, after all. Some permissioned sidechains may work entirely on a bank server-cluster and not require any additional “free-validators” at all. The only property it requires to be a sidechain is that it is interoperable with the Cardano “mainchain” (SL\CL). Cardano validators in this case do not perform any work validating the sidechain and they (logically) do not receive any fees for that. Cardano Ecosystem in that case benefits from adoption.

[ZCryt0Knight]

@vantuz-subhuman

Not necessarily, Cardano Ecosystem should benefit from fees only when there’s some work put by the Cardano Network specifically in this transaction. Fees are payments for services, after all. Some permissioned sidechains may work entirely on a bank server-cluster and not require any additional “free-validators” at all. The only property it requires to be a sidechain is that it is interoperable with the Cardano “mainchain” (SL\CL). Cardano validators in this case do not perform any work validating the sidechain and they (logically) do not receive any fees for that. Cardano Ecosystem in that case benefits from adoption.

So, let me get this straight. In this case the banks get a free environment to operate their permissioned blockchain? What’s the rationale for them to have any links to the mainchain in this case?

[vantuz-subhuman]

@ZCryt0Knight

So, let me get this straight. In this case the banks get a free environment to operate their permissioned blockchain?

What do you mean by “free” environment? They are running the chain on their own servers and they are paying the costs of running it and they are collecting all the fees coming from that chain (if any present).

@ZCryt0Knight

What’s the rationale for them to have any links to the mainchain in this case?

What’s the rationale to have a pizza-place on the central street, instead of some hidden alley? Banks provide services to attract clients. If Cardano gets popular - having a direct interoperation with it would attract new clients. Especially if your country already uses the same system to manage some of its infrastructural stuff, like coffee-supply.

[ZCryt0Knight]

@vantuz-subhuman

What do you mean by “free” environment? They are running the chain on their own servers and they are paying the costs of running it and they are collecting all the fees coming from that chain (if any present).

They are using the sidechain technology developed by Cardano…

@vantuz-subhuman

What’s the rationale to have a pizza-place on the central street, instead of some hidden alley? Banks provide services to attract clients. If Cardano gets popular - having a direct interoperation with it would attract new clients. Especially if your country already uses the same system to manage some of its infrastructural stuff, like coffee-supply.

I think they will save a ton of money switching to sidechains, even in a walled-garden environment, wouldn’t they? I am thinking about all the functions of a bank that could be automated in a provably safe environment of Cardano. Generating reports, keeping track of money movement in real time, all this could be automated… to the degree they replace actual people and resources that are spent currently. Some functions might require external (read: independent) validators which could add an extra level of security.

In other words a bank might serve their customers with one tenth of operating cost it currently has. This would be a strong enough motivation to move onto Cardano. Bank’s are the most conservative creatures in the known universe and won’t move a finger for marketing purposes unless there are real dollars attached to them. Maybe I am wrong.

One last question: is there a technical limit on how many sidechains Cardano can have at any point in time? If they all connect to MainChain at certain intervals then we might have technical limits based on time… but they may have already solved that.

[vantuz-subhuman]

@ZCryt0Knight

They are using the sidechain technology developed by Cardano…

It’s free software Anyone can launch private Cardano chain and use it at any time, if they manage the technical part of it.

@ZCryt0Knight

In other words a bank might serve their customers with one tenth of operating cost it currently has. This would be a strong enough motivation to move onto Cardano

Awesome! Isn’t it even better? More reasons to have many different services connected to Cardano )

@ZCryt0Knight

One last question: is there a technical limit on how many sidechains Cardano can have at any point in time? If they all connect to MainChain at certain intervals then we might have technical limits based on time… but they may have already solved that.

No universal limit I’m aware of, atm. That’s just the question of scaling, afaik, the more sidechains you have to manage - the more work your nodes have to do and the more info goes into blocks. But the scaling ratio should not be steep, so basically it’s something like you get “rational” number of chains “out-of-the-box” and have to do some additional work to allow “large” amount. Of course, no actual numbers are available at the moment. More info should be available closed to the release, and maybe some additional work is planned for Basho.

[ZCryt0Knight]

@vantuz-subhuman

No universal limit I’m aware of, atm. That’s just the question of scaling, afaik, the more sidechains you have to manage - the more work your nodes have to do and the more info goes into blocks. But the scaling ratio should not be steep, so basically it’s something like you get “ rational ” number of chains “out-of-the-box” and have to do some additional work to allow “ large ” amount. Of course, no actual numbers are available at the moment. More info should be available closed to the release, and maybe some additional work is planned for Basho.

That is great! thanks for the detailed response, as always.